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Loans and Allowance for Loan and Lease Losses
 3 Months Ended
Mar. 31, 2022
Allowance For Loan And Lease Losses Writeoffs Net [Abstract]  
Loans and Allowance for Loan and Lease Losses

5.

LOANS AND ALLOWANCE FOR LOAN AND LEASE LOSSES

Portfolio Segments

The Company has divided the loan portfolio into the following portfolio segments based on risk characteristics:

Construction, land development and other land loans – Commercial construction, land and land development loans include loans for the development of residential housing projects, loans for the development of commercial and industrial use property, loans for the purchase and improvement of raw land and loans primarily for agricultural production that are secured by farmland. These loans are secured in whole or in part by the underlying real estate collateral and are generally guaranteed by the principals of the borrowing entity.

Secured by 1-4 family residential properties – These loans include conventional mortgage loans on one-to-four family residential properties. These properties may serve as the borrower’s primary residence, vacation home or investment property. Also included in this portfolio are home equity loans and lines of credit. This type of lending, which is secured by a first or second mortgage on the borrower’s residence, allows customers to borrow against the equity in their home.

Secured by multi-family residential properties – This portfolio segment includes mortgage loans secured by apartment buildings.

Secured by non-farm, non-residential properties – This portfolio segment includes real estate loans secured by commercial and industrial properties, office or mixed-use facilities, strip shopping centers or other commercial property. These loans are generally guaranteed by the principals of the borrowing entity.

Commercial and industrial loans and leases – This portfolio segment includes loans and leases to commercial customers for use in the normal course of business. These credits may be loans, lines of credit and leases to financially strong borrowers, secured by inventories, equipment or receivables, and are generally guaranteed by the principals of the borrowing entity.

Direct consumer – This portfolio segment includes a variety of secured and unsecured personal loans, including automobile loans, loans for household and personal purposes and all other direct consumer installment loans.

Branch retail – This portfolio segment includes loans secured by collateral purchased by consumers at retail stores with whom ALC had an established relationship through its branch network to provide financing for the retail products sold if applicable underwriting standards were met. The collateral securing these loans generally includes personal property items such as furniture, ATVs and home appliances.

Indirect – This portfolio segment includes loans secured by collateral purchased by consumers at retail stores with whom the Company has an established relationship to provide financing for the retail products sold if applicable underwriting standards are met. The collateral securing these loans generally includes recreational vehicles, campers, boats, horse trailers and cargo trailers.

As of March 31, 2022 and December 31, 2021, the composition of the loan portfolio by reporting segment and portfolio segment was as follows:

 

 

 

March 31, 2022

 

 

 

Bank

 

 

ALC

 

 

Total

 

 

 

(Dollars in Thousands)

 

Real estate loans:

 

 

 

 

 

 

 

 

 

 

 

 

Construction, land development and other land loans

 

$

52,817

 

 

$

—

 

 

$

52,817

 

Secured by 1-4 family residential properties

 

 

67,705

 

 

 

2,055

 

 

 

69,760

 

Secured by multi-family residential properties

 

 

50,796

 

 

 

—

 

 

 

50,796

 

Secured by non-farm, non-residential properties

 

 

177,752

 

 

 

—

 

 

 

177,752

 

Commercial and industrial loans and leases (1)

 

 

68,098

 

 

 

—

 

 

 

68,098

 

Consumer loans:

 

 

 

 

 

 

 

 

 

 

 

 

Direct consumer

 

 

6,191

 

 

 

11,832

 

 

 

18,023

 

Branch retail

 

 

—

 

 

 

21,891

 

 

 

21,891

 

Indirect

 

 

220,931

 

 

 

—

 

 

 

220,931

 

Total loans

 

 

644,290

 

 

 

35,778

 

 

 

680,068

 

Less: Unearned interest, fees and deferred cost

 

 

(213

)

 

 

1,951

 

 

 

1,738

 

Allowance for loan and lease losses

 

 

6,894

 

 

 

1,590

 

 

 

8,484

 

Net loans

 

$

637,609

 

 

$

32,237

 

 

$

669,846

 

 

 

 

 

 

December 31, 2021

 

 

 

Bank

 

 

ALC

 

 

Total

 

 

 

(Dollars in Thousands)

 

Real estate loans:

 

 

 

 

 

 

 

 

 

 

 

 

Construction, land development and other land loans

 

$

67,048

 

 

$

—

 

 

$

67,048

 

Secured by 1-4 family residential properties

 

 

70,439

 

 

 

2,288

 

 

 

72,727

 

Secured by multi-family residential properties

 

 

46,000

 

 

 

—

 

 

 

46,000

 

Secured by non-farm, non-residential properties

 

 

197,901

 

 

 

—

 

 

 

197,901

 

Commercial and industrial loans and leases (1)

 

 

73,947

 

 

 

—

 

 

 

73,947

 

Consumer loans:

 

 

 

 

 

 

 

 

 

 

 

 

Direct consumer

 

 

5,972

 

 

 

15,717

 

 

 

21,689

 

Branch retail

 

 

—

 

 

 

25,692

 

 

 

25,692

 

Indirect

 

 

205,940

 

 

 

—

 

 

 

205,940

 

Total loans

 

 

667,247

 

 

 

43,697

 

 

 

710,944

 

Less: Unearned interest, fees and deferred cost

 

 

(324

)

 

 

2,918

 

 

 

2,594

 

Allowance for loan and lease losses

 

 

7,038

 

 

 

1,282

 

 

 

8,320

 

Net loans

 

$

660,533

 

 

$

39,497

 

 

$

700,030

 

 

 

(1)

Includes equipment financing leases and PPP loans. As of March 31, 2022 and December 31, 2021, equipment finance leases totaled $10.5 million and $11.0 million, respectively, and PPP loans totaled $0.6 million and $1.7 million, respectively.

The Company makes commercial, real estate and installment loans to its customers. Although the Company has a diversified loan portfolio, 51.6% and 54.0% of the portfolio was concentrated in loans secured by real estate as of March 31, 2022 and December 31, 2021, respectively.

Loans with a carrying value of $69.3 million and $66.6 million were pledged as collateral to secure Federal Home Loan Bank (“FHLB”) borrowings as of March 31, 2022 and December 31, 2021, respectively.

Related Party Loans

In the ordinary course of business, the Bank makes loans to certain officers and directors of the Company, including companies with which they are associated. These loans are made on the same terms as those prevailing for comparable transactions with unrelated parties. Management believes that such loans do not represent more than a normal risk of collectability, nor do they present other unfavorable features. The aggregate balances of such related party loans and commitments were $0.3 million as of both March 31, 2022 and December 31, 2021. During the three months ended March 31, 2022, there were no new loans to these parties, and repayments by active related parties were $2 thousand. During the year ended December 31, 2021, there were no new loans to these parties, and repayments by active related parties were $0.1 million.

 

 

Allowance for Loan and Lease Losses

The following tables present changes in the allowance for loan and lease losses during the three months ended March 31, 2022 and 2021 and the related loan balances by loan type as of March 31, 2022 and 2021:

 

 

 

As of and for the Three Months Ended March 31, 2022

 

 

 

Construction,

Land

Development,

and Other

 

 

1-4

Family

 

 

Real

Estate

Multi-

Family

 

 

Non-

Farm Non-

Residential

 

 

Commercial and

Industrial

 

 

Direct

Consumer

 

 

Branch Retail

 

 

Indirect

 

 

Total

 

 

 

(Dollars in Thousands)

 

Allowance for loan and lease losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

628

 

 

$

690

 

 

$

437

 

 

$

1,958

 

 

$

860

 

 

$

1,004

 

 

$

304

 

 

$

2,439

 

 

$

8,320

 

Charge-offs

 

 

—

 

 

 

(2

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(601

)

 

 

(101

)

 

 

(25

)

 

 

(729

)

Recoveries

 

 

1

 

 

 

8

 

 

 

—

 

 

 

1

 

 

 

—

 

 

 

128

 

 

 

23

 

 

 

11

 

 

 

172

 

Provision

 

 

(142

)

 

 

(12

)

 

 

47

 

 

 

(185

)

 

 

29

 

 

 

533

 

 

 

295

 

 

 

156

 

 

 

721

 

Ending balance

 

$

487

 

 

$

684

 

 

$

484

 

 

$

1,774

 

 

$

889

 

 

$

1,064

 

 

$

521

 

 

$

2,581

 

 

$

8,484

 

Ending balance of allowance attributable to

   loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated for impairment

 

$

—

 

 

$

9

 

 

$

—

 

 

$

—

 

 

$

56

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

65

 

Collectively evaluated for impairment

 

 

487

 

 

 

675

 

 

 

484

 

 

 

1,774

 

 

 

833

 

 

 

1,064

 

 

 

521

 

 

 

2,581

 

 

 

8,419

 

Total allowance for loan and lease losses

 

$

487

 

 

$

684

 

 

$

484

 

 

$

1,774

 

 

$

889

 

 

$

1,064

 

 

$

521

 

 

$

2,581

 

 

$

8,484

 

Ending balance of loans receivable:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated for impairment

 

$

—

 

 

$

637

 

 

$

—

 

 

$

1,039

 

 

$

670

 

 

$

20

 

 

$

—

 

 

$

—

 

 

$

2,366

 

Collectively evaluated for impairment

 

 

52,817

 

 

 

69,123

 

 

 

50,796

 

 

 

176,713

 

 

 

67,428

 

 

 

18,003

 

 

 

21,891

 

 

 

220,931

 

 

 

677,702

 

Loans acquired with deteriorated credit quality

 

 

—

 

 

 

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 

 

 

 

—

 

 

 

—

 

Total loans receivable

 

$

52,817

 

 

$

69,760

 

 

$

50,796

 

 

$

177,752

 

 

$

68,098

 

 

$

18,023

 

 

$

21,891

 

 

$

220,931

 

 

$

680,068

 

 

 

 

As of and for the Three Months Ended March 31, 2021

 

 

 

Construction,

Land

Development,

and Other

 

 

1-4

Family

 

 

Real

Estate

Multi-

Family

 

 

Non-

Farm Non-

Residential

 

 

Commercial and

Industrial

 

 

Direct

Consumer

 

 

Branch Retail

 

 

Indirect

 

 

Total

 

 

 

(Dollars in Thousands)

 

Allowance for loan and lease losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

393

 

 

$

639

 

 

$

577

 

 

$

1,566

 

 

$

1,008

 

 

$

1,202

 

 

$

373

 

 

$

1,712

 

 

$

7,470

 

Charge-offs

 

 

(21

)

 

 

(9

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(348

)

 

 

(130

)

 

 

(117

)

 

 

(625

)

Recoveries

 

 

2

 

 

 

3

 

 

 

—

 

 

 

1

 

 

 

—

 

 

 

170

 

 

 

42

 

 

 

11

 

 

 

229

 

Provision

 

 

70

 

 

 

112

 

 

 

(36

)

 

 

437

 

 

 

(412

)

 

 

13

 

 

 

72

 

 

 

145

 

 

 

401

 

Ending balance

 

$

444

 

 

$

745

 

 

$

541

 

 

$

2,004

 

 

$

596

 

 

$

1,037

 

 

$

357

 

 

$

1,751

 

 

$

7,475

 

Ending balance of allowance attributable to

   loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated for impairment

 

$

—

 

 

$

11

 

 

$

—

 

 

$

—

 

 

$

60

 

 

$

1

 

 

$

—

 

 

$

—

 

 

$

72

 

Collectively evaluated for impairment

 

 

444

 

 

 

734

 

 

 

541

 

 

 

2,004

 

 

 

536

 

 

 

1,036

 

 

 

357

 

 

 

1,751

 

 

 

7,403

 

Total allowance for loan and lease losses

 

$

444

 

 

$

745

 

 

$

541

 

 

$

2,004

 

 

$

596

 

 

$

1,037

 

 

$

357

 

 

$

1,751

 

 

$

7,475

 

Ending balance of loans receivable:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated for impairment

 

$

—

 

 

$

720

 

 

$

—

 

 

$

4,237

 

 

$

567

 

 

$

23

 

 

$

—

 

 

$

—

 

 

$

5,547

 

Collectively evaluated for impairment

 

 

48,491

 

 

 

81,468

 

 

 

54,180

 

 

 

189,389

 

 

 

79,271

 

 

 

26,975

 

 

 

31,075

 

 

 

153,940

 

 

 

664,789

 

Loans acquired with deteriorated credit quality

 

 

—

 

 

 

161

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

161

 

Total loans receivable

 

$

48,491

 

 

$

82,349

 

 

$

54,180

 

 

$

193,626

 

 

$

79,838

 

 

$

26,998

 

 

$

31,075

 

 

$

153,940

 

 

$

670,497

 

 

Credit Quality Indicators

The Company utilizes a credit grading system that provides a uniform framework for establishing and monitoring credit risk in the loan portfolio. Under this system, construction, land, multi-family real estate, other commercial real estate, and commercial and industrial loans are graded based on pre-determined risk metrics and categorized into one of nine risk grades. These risk grades can be summarized into categories described as pass, special mention, substandard, doubtful and loss, as described in further detail below.

 

•

Pass (Risk Grades 1-5): Loans in this category include obligations in which the probability of default is considered low.

 

•

Special Mention (Risk Grade 6): Loans in this category exhibit potential credit weaknesses or downward trends deserving management’s close attention. If left uncorrected, these potential weaknesses may result in the deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date. Special mention loans are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification. Although a special mention asset has a higher probability of default than pass-rated categories, its default is not imminent.

 

•

Substandard (Risk Grade 7): Loans in this category have defined weaknesses that jeopardize the orderly liquidation of debt. A substandard loan is inadequately protected by the current worth and paying capacity of the obligor or by the collateral pledged, if any. Normal repayment from the borrower is in jeopardy, although no loss of principal is envisioned. There is a distinct possibility that a partial loss of interest and/or principal will occur if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified as substandard.

 

•

Doubtful (Risk Grade 8): Loans classified as doubtful have all of the weaknesses found in substandard loans, with the added characteristic that the weaknesses make collection of debt in full, based on currently existing facts, conditions and values, highly questionable or improbable. Serious problems exist such that partial loss of principal is likely; however, because of certain important, reasonably specific pending factors that may work to strengthen the assets, the loans’ classification as estimated losses is deferred until a more exact status may be determined. Such pending factors may include proposed merger, acquisition or liquidation procedures, capital injection, perfection of liens on additional collateral and refinancing plans. Loans classified as doubtful may include loans to borrowers that have demonstrated a history of failing to live up to agreements. The Company did not have any loans classified as Doubtful (Risk Grade 8) as of March 31, 2022 or December 31, 2021.

 

•

Loss (Risk Grade 9): Loans are classified in this category when borrowers are deemed incapable of repayment of unsecured debt. Loans to such borrowers are considered uncollectable and of such little value that continuance as active assets of the Company is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather that it is not prudent to defer writing off these assets, even though partial recovery may be realized in the future. The Company did not have any loans classified as Loss (Risk Grade 9) as of March 31, 2022 or December 31, 2021.

Because residential real estate and consumer loans are more uniform in nature, each loan is categorized into one of two risk grades, depending on whether the loan is considered to be performing or nonperforming. Performing loans are loans that are paying principal and interest in accordance with a contractual agreement. Nonperforming loans are loans that have demonstrated characteristics that indicate a probability of loss.

The tables below illustrate the carrying amount of loans by credit quality indicator as of March 31, 2022:

 

 

 

March 31, 2022

 

 

 

Pass 1-5

 

 

Special Mention 6

 

 

Substandard 7

 

 

Total

 

 

 

(Dollars in Thousands)

 

Loans secured by real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction, land development and other land loans

 

$

52,815

 

 

$

—

 

 

$

2

 

 

$

52,817

 

Secured by multi-family residential properties

 

 

50,796

 

 

 

—

 

 

 

—

 

 

 

50,796

 

Secured by non-farm, non-residential properties

 

 

173,661

 

 

 

3,069

 

 

 

1,022

 

 

 

177,752

 

Commercial and industrial loans

 

 

66,872

 

 

 

—

 

 

 

1,226

 

 

 

68,098

 

Total

 

$

344,144

 

 

$

3,069

 

 

$

2,250

 

 

$

349,463

 

As a percentage of total loans

 

 

98.48

%

 

 

0.88

%

 

 

0.64

%

 

 

100.00

%

 

 

 

 

March 31, 2022

 

 

 

Performing

 

 

Nonperforming

 

 

Total

 

 

 

(Dollars in Thousands)

 

Loans secured by real estate:

 

 

 

 

 

 

 

 

 

 

 

 

Secured by 1-4 family residential properties

 

$

68,585

 

 

$

1,175

 

 

$

69,760

 

Consumer loans:

 

 

 

 

 

 

 

 

 

 

 

 

Direct consumer

 

 

17,280

 

 

 

743

 

 

 

18,023

 

Branch retail

 

 

21,572

 

 

 

319

 

 

 

21,891

 

Indirect

 

 

220,931

 

 

 

—

 

 

 

220,931

 

Total

 

$

328,368

 

 

$

2,237

 

 

$

330,605

 

As a percentage of total loans

 

 

99.32

%

 

 

0.68

%

 

 

100.00

%

 

 

The tables below illustrate the carrying amount of loans by credit quality indicator as of December 31, 2021:

 

 

 

December 31, 2021

 

 

 

Pass 1-5

 

 

Special Mention 6

 

 

Substandard 7

 

 

Total

 

 

 

(Dollars in Thousands)

 

Loans secured by real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction, land development and other land loans

 

$

67,046

 

 

$

—

 

 

$

2

 

 

$

67,048

 

Secured by multi-family residential properties

 

 

43,472

 

 

 

2,528

 

 

 

—

 

 

 

46,000

 

Secured by non-farm, non-residential properties

 

 

189,425

 

 

 

7,442

 

 

 

1,034

 

 

 

197,901

 

Commercial and industrial loans

 

 

72,116

 

 

 

333

 

 

 

1,498

 

 

 

73,947

 

Total

 

$

372,059

 

 

$

10,303

 

 

$

2,534

 

 

$

384,896

 

As a percentage of total loans

 

 

96.66

%

 

 

2.68

%

 

 

0.66

%

 

 

100.00

%

 

 

 

 

December 31, 2021

 

 

 

Performing

 

 

Nonperforming

 

 

Total

 

 

 

(Dollars in Thousands)

 

Loans secured by real estate:

 

 

 

 

 

 

 

 

 

 

 

 

Secured by 1-4 family residential properties

 

$

71,526

 

 

$

1,201

 

 

$

72,727

 

Consumer loans:

 

 

 

 

 

 

 

 

 

 

 

 

Direct consumer

 

 

20,939

 

 

 

750

 

 

 

21,689

 

Branch retail

 

 

25,486

 

 

 

206

 

 

 

25,692

 

Indirect

 

 

205,940

 

 

 

—

 

 

 

205,940

 

Total

 

$

323,891

 

 

$

2,157

 

 

$

326,048

 

As a percentage of total loans

 

 

99.34

%

 

 

0.66

%

 

 

100.00

%

 

The following table provides an aging analysis of past due loans by class as of March 31, 2022:

 

 

 

As of March 31, 2022

 

 

 

30-59

Days

Past

Due

 

 

60-89

Days

Past

Due

 

 

90

Days

Or

Greater

 

 

Total

Past

Due

 

 

Current

 

 

Total

Loans

 

 

Recorded

Investment

> 90 Days

And

Accruing

 

 

 

(Dollars in Thousands)

 

Loans secured by real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction, land development

   and other land loans

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

52,817

 

 

$

52,817

 

 

$

—

 

Secured by 1-4 family residential

   properties

 

 

334

 

 

 

24

 

 

 

164

 

 

$

522

 

 

 

69,238

 

 

 

69,760

 

 

 

—

 

Secured by multi-family residential

   properties

 

 

—

 

 

 

—

 

 

 

—

 

 

$

—

 

 

 

50,796

 

 

 

50,796

 

 

 

—

 

Secured by non-farm, non-residential

   properties

 

 

3

 

 

 

—

 

 

 

—

 

 

$

3

 

 

 

177,749

 

 

 

177,752

 

 

 

—

 

Commercial and industrial loans

 

 

21

 

 

 

—

 

 

 

234

 

 

$

255

 

 

 

67,843

 

 

 

68,098

 

 

 

—

 

Consumer loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct consumer

 

 

438

 

 

 

226

 

 

 

723

 

 

$

1,387

 

 

 

16,636

 

 

 

18,023

 

 

 

—

 

Branch retail

 

 

220

 

 

 

189

 

 

 

319

 

 

$

728

 

 

 

21,163

 

 

 

21,891

 

 

 

—

 

Indirect

 

 

21

 

 

 

—

 

 

 

—

 

 

$

21

 

 

 

220,910

 

 

 

220,931

 

 

 

—

 

Total

 

$

1,037

 

 

$

439

 

 

$

1,440

 

 

$

2,916

 

 

$

677,152

 

 

$

680,068

 

 

$

—

 

As a percentage of total loans

 

 

0.16

%

 

 

0.06

%

 

 

0.21

%

 

 

0.43

%

 

 

99.57

%

 

 

100.00

%

 

 

 

 

 

 

 

 

The following table provides an aging analysis of past due loans by class as of December 31, 2021:

 

 

 

As of December 31, 2021

 

 

 

30-59

Days

Past

Due

 

 

60-89

Days

Past

Due

 

 

90

Days

Or

Greater

 

 

Total

Past

Due

 

 

Current

 

 

Total

Loans

 

 

Recorded

Investment

> 90 Days

And

Accruing

 

 

 

(Dollars in Thousands)

 

Loans secured by real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction, land development

   and other land loans

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

67,048

 

 

$

67,048

 

 

$

—

 

Secured by 1-4 family residential

   properties

 

 

349

 

 

 

23

 

 

 

20

 

 

 

392

 

 

 

72,335

 

 

 

72,727

 

 

 

—

 

Secured by multi-family residential

   properties

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

46,000

 

 

 

46,000

 

 

 

—

 

Secured by non-farm, non-residential

   properties

 

 

403

 

 

 

—

 

 

 

—

 

 

 

403

 

 

 

197,498

 

 

 

197,901

 

 

 

—

 

Commercial and industrial loans

 

 

54

 

 

 

—

 

 

 

234

 

 

 

288

 

 

 

73,659

 

 

 

73,947

 

 

 

—

 

Consumer loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct consumer

 

 

652

 

 

 

589

 

 

 

730

 

 

 

1,971

 

 

 

19,718

 

 

 

21,689

 

 

 

—

 

Branch retail

 

 

377

 

 

 

182

 

 

 

206

 

 

 

765

 

 

 

24,927

 

 

 

25,692

 

 

 

—

 

Indirect

 

 

43

 

 

 

14

 

 

 

—

 

 

 

57

 

 

 

205,883

 

 

 

205,940

 

 

 

—

 

Total

 

$

1,878

 

 

$

808

 

 

$

1,190

 

 

$

3,876

 

 

$

707,068

 

 

$

710,944

 

 

$

—

 

As a percentage of total loans

 

 

0.27

%

 

 

0.11

%

 

 

0.17

%

 

 

0.55

%

 

 

99.45

%

 

 

100.00

%

 

 

 

 

 

The following table provides an analysis of non-accruing loans by class as of March 31, 2022 and December 31, 2021:

 

 

 

Loans on Non-Accrual Status

 

 

 

March 31,

2022

 

 

December 31,

2021

 

 

 

(Dollars in Thousands)

 

Loans secured by real estate:

 

 

 

 

 

 

 

 

Construction, land development and other land loans

 

$

2

 

 

$

2

 

Secured by 1-4 family residential properties

 

 

899

 

 

 

780

 

Secured by multi-family residential properties

 

 

—

 

 

 

—

 

Secured by non-farm, non-residential properties

 

 

—

 

 

 

—

 

Commercial and industrial loans

 

 

274

 

 

 

277

 

Consumer loans:

 

 

 

 

 

 

 

 

Direct consumer

 

 

734

 

 

 

743

 

Branch retail

 

 

319

 

 

 

206

 

Indirect

 

 

—

 

 

 

—

 

Total loans

 

$

2,228

 

 

$

2,008

 

 

Impaired Loans

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the related loan agreement. If a loan is impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the liquidation of the collateral. At the Bank, all loans of $0.5 million or more that have a credit quality risk grade of seven or above are identified for impairment analysis. At management’s discretion, additional loans may be impaired based on homogeneous factors such as changes in the nature and volume of the portfolio, portfolio quality, adequacy of the underlying collateral value, loan concentrations, historical charge-off trends and economic conditions that may affect the borrower’s ability to pay. At ALC, all loans of $50 thousand or more that are 90 days or more past due are identified for impairment analysis. As of both March 31, 2022 and December 31, 2021, there were $0.1 million of impaired loans with no related allowance recorded at ALC. Impaired loans, or portions thereof, are charged off when deemed uncollectable.

As of March 31, 2022, the carrying amount of the Company’s impaired loans consisted of the following:

 

 

 

March 31, 2022

 

 

 

Carrying

Amount

 

 

Unpaid

Principal

Balance

 

 

Related

Allowances

 

 

 

(Dollars in Thousands)

 

Impaired loans with no related allowance recorded

 

 

 

 

 

 

 

 

 

 

 

 

Loans secured by real estate

 

 

 

 

 

 

 

 

 

 

 

 

Construction, land development and other land loans

 

$

—

 

 

$

—

 

 

$

—

 

Secured by 1-4 family residential properties

 

 

621

 

 

 

621

 

 

 

—

 

Secured by multi-family residential properties

 

 

—

 

 

 

—

 

 

 

—

 

Secured by non-farm, non-residential properties

 

 

1,039

 

 

 

1,039

 

 

 

—

 

Commercial and industrial

 

 

614

 

 

 

614

 

 

 

—

 

Direct consumer

 

 

20

 

 

 

20

 

 

 

—

 

Total loans with no related allowance recorded

 

$

2,294

 

 

$

2,294

 

 

$

—

 

Impaired loans with an allowance recorded

 

 

 

 

 

 

 

 

 

 

 

 

Loans secured by real estate

 

 

 

 

 

 

 

 

 

 

 

 

Construction, land development and other land loans

 

$

—

 

 

$

—

 

 

$

—

 

Secured by 1-4 family residential properties

 

 

16

 

 

 

16

 

 

 

9

 

Secured by multi-family residential properties

 

 

—

 

 

 

—

 

 

 

—

 

Secured by non-farm, non-residential properties

 

 

—

 

 

 

—

 

 

 

—

 

Commercial and industrial

 

 

56

 

 

 

56

 

 

 

56

 

Direct consumer

 

 

—

 

 

 

—

 

 

 

—

 

Total loans with an allowance recorded

 

$

72

 

 

$

72

 

 

$

65

 

Total impaired loans

 

 

 

 

 

 

 

 

 

 

 

 

Loans secured by real estate

 

 

 

 

 

 

 

 

 

 

 

 

Construction, land development and other land loans

 

$

—

 

 

$

—

 

 

$

—

 

Secured by 1-4 family residential properties

 

 

637

 

 

 

637

 

 

 

9

 

Secured by multi-family residential properties

 

 

—

 

 

 

—

 

 

 

—

 

Secured by non-farm, non-residential properties

 

 

1,039

 

 

 

1,039

 

 

 

—

 

Commercial and industrial

 

 

670

 

 

 

670

 

 

 

56

 

Direct consumer

 

 

20

 

 

 

20

 

 

 

—

 

Total impaired loans

 

$

2,366

 

 

$

2,366

 

 

$

65

 

 

 

As of December 31, 2021, the carrying amount of the Company’s impaired loans consisted of the following:  

 

 

 

December 31, 2021

 

 

 

Carrying

Amount

 

 

Unpaid

Principal

Balance

 

 

Related

Allowances

 

 

 

(Dollars in Thousands)

 

Impaired loans with no related allowance recorded

 

 

 

 

 

 

 

 

 

 

 

 

Loans secured by real estate

 

 

 

 

 

 

 

 

 

 

 

 

Construction, land development and other land loans

 

$

—

 

 

$

—

 

 

$

—

 

Secured by 1-4 family residential properties

 

 

630

 

 

 

630

 

 

 

—

 

Secured by multi-family residential properties

 

 

—

 

 

 

—

 

 

 

—

 

Secured by non-farm, non-residential properties

 

 

1,051

 

 

 

1,051

 

 

 

—

 

Commercial and industrial

 

 

823

 

 

 

823

 

 

 

—

 

Direct consumer

 

 

21

 

 

 

21

 

 

 

—

 

Total loans with no related allowance recorded

 

$

2,525

 

 

$

2,525

 

 

$

—

 

Impaired loans with an allowance recorded

 

 

 

 

 

 

 

 

 

 

 

 

Loans secured by real estate

 

 

 

 

 

 

 

 

 

 

 

 

Construction, land development and other land loans

 

$

—

 

 

$

—

 

 

$

—

 

Secured by 1-4 family residential properties

 

 

16

 

 

 

16

 

 

 

10

 

Secured by multi-family residential properties

 

 

—

 

 

 

—

 

 

 

—

 

Secured by non-farm, non-residential properties

 

 

—

 

 

 

—

 

 

 

—

 

Commercial and industrial

 

 

57

 

 

 

57

 

 

 

57

 

Direct consumer

 

 

—

 

 

 

—

 

 

 

—

 

Total loans with an allowance recorded

 

$

73

 

 

$

73

 

 

$

67

 

Total impaired loans

 

 

 

 

 

 

 

 

 

 

 

 

Loans secured by real estate

 

.

 

 

 

 

 

 

 

 

 

Construction, land development and other land loans

 

$

—

 

 

$

—

 

 

$

—

 

Secured by 1-4 family residential properties

 

 

646

 

 

 

646

 

 

 

10

 

Secured by multi-family residential properties

 

 

—

 

 

 

—

 

 

 

—

 

Secured by non-farm, non-residential properties

 

 

1,051

 

 

 

1,051

 

 

 

—

 

Commercial and industrial

 

 

880

 

 

 

880

 

 

 

57

 

Direct consumer

 

 

21

 

 

 

21

 

 

 

—

 

Total impaired loans

 

$

2,598

 

 

$

2,598

 

 

$

67

 

The average net investment in impaired loans and interest income recognized and received on impaired loans during the three months ended March 31, 2022 and the year ended December 31, 2021 were as follows:

 

 

 

Three Months Ended March 31, 2022

 

 

 

Average

Recorded

Investment

 

 

Interest

Income

Recognized

 

 

Interest

Income

Received

 

 

 

(Dollars in Thousands)

 

Loans secured by real estate

 

 

 

 

 

 

 

 

 

 

 

 

Construction, land development and other land loans

 

$

—

 

 

$

—

 

 

$

—

 

Secured by 1-4 family residential properties

 

 

642

 

 

 

2

 

 

 

1

 

Secured by multi-family residential properties

 

 

—

 

 

 

—

 

 

 

—

 

Secured by non-farm, non-residential properties

 

 

1,043

 

 

 

13

 

 

 

15

 

Commercial and industrial

 

 

739

 

 

 

5

 

 

 

5

 

Direct consumer

 

 

20

 

 

 

—

 

 

 

1

 

Total

 

$

2,444

 

 

$

20

 

 

$

22

 

 

 

 

 

Year Ended December 31, 2021

 

 

 

Average

Recorded

Investment

 

 

Interest

Income

Recognized

 

 

Interest

Income

Received

 

 

 

(Dollars in Thousands)

 

Loans secured by real estate

 

 

 

 

 

 

 

 

 

 

 

 

Construction, land development and other land loans

 

$

—

 

 

$

—

 

 

$

—

 

Secured by 1-4 family residential properties

 

 

773

 

 

 

31

 

 

 

31

 

Secured by multi-family residential properties

 

 

—

 

 

 

—

 

 

 

—

 

Secured by non-farm, non-residential properties

 

 

2,377

 

 

 

140

 

 

 

108

 

Commercial and industrial

 

 

637

 

 

 

61

 

 

 

40

 

Direct consumer

 

 

22

 

 

 

9

 

 

 

2

 

Total

 

$

3,809

 

 

$

241

 

 

$

181

 

 

Loans on which the accrual of interest has been discontinued amounted to $2.2 million and $2.0 million as of March 31, 2022 and December 31, 2021, respectively. If interest on those loans had been accrued, there would have been $18 thousand and $52 thousand of interest accrued for the periods ended March 31, 2022 and December 31, 2021, respectively. Interest income related to these loans for the three months ended March 31, 2022 and the year ended December 31, 2021 was $6 thousand and $30 thousand, respectively.

Troubled Debt Restructurings

Troubled debt restructurings include loans with respect to which concessions have been granted to borrowers that generally would not have otherwise been considered had the borrowers not been experiencing financial difficulty. The concessions granted may include payment schedule modifications, interest rate reductions, maturity date extensions, modifications of note structure, principal balance reductions or some combination of these concessions. There were no loans modified with concessions granted during the three months ended March 31, 2022 and two loans with balances totaling $0.6 million modified with concessions granted during the year ended December 31, 2021. Restructured loans may involve loans remaining on non-accrual, moving to non-accrual or continuing on accrual status, depending on the individual facts and circumstances of the borrower. Non-accrual restructured loans are included with all other non-accrual loans. In addition, all accruing restructured loans are reported as troubled debt restructurings. Generally, restructured loans remain on non-accrual until the customer has attained a sustained period of repayment performance under the modified loan terms (generally a minimum of six months). However, performance prior to the restructuring, or significant events that coincide with the restructuring, are considered in assessing whether the borrower can meet the new terms and whether the loan should be returned to or maintained on non-accrual status. If the borrower’s ability to meet the revised payment schedule is not reasonably assured, then the loan remains on non-accrual. The Company did not have any non-accruing loans that were previously restructured and that remained on non-accrual status as of both March 31, 2022 and December 31, 2021. For both the three months ended March 31, 2022 and the year ended December 31, 2021, the Company had no loans that were restored to accrual status based on a sustained period of repayment performance.

The following table provides, as of March 31, 2022 and December 31, 2021, the number of loans remaining in each loan category that the Company had previously modified in a troubled debt restructuring, as well as the pre- and post-modification principal balance as of each date.

 

 

 

March 31, 2022

 

 

December 31, 2021

 

 

 

Number

of Loans

 

 

Pre-

Modification

Outstanding

Principal

Balance

 

 

Post-

Modification

Principal

Balance

 

 

Number

of Loans

 

 

Pre-

Modification

Outstanding

Principal

Balance

 

 

Post-

Modification

Principal

Balance

 

 

 

(Dollars in Thousands)

 

Loans secured by real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction, land development and other land

   loans

 

 

1

 

 

$

107

 

 

$

—

 

 

 

1

 

 

$

107

 

 

$

—

 

Secured by 1-4 family residential properties

 

 

2

 

 

 

59

 

 

 

12

 

 

 

2

 

 

 

59

 

 

 

12

 

Secured by non-farm, non-residential properties

 

 

2

 

 

 

621

 

 

 

615

 

 

 

2

 

 

 

621

 

 

 

617

 

Commercial loans

 

 

2

 

 

 

116

 

 

 

29

 

 

 

2

 

 

 

116

 

 

 

31

 

Total

 

 

7

 

 

$

903

 

 

$

656

 

 

 

7

 

 

$

903

 

 

$

660

 

 

As of March 31, 2022 and December 31, 2021, no loans that previously had been modified in a troubled debt restructuring had defaulted subsequent to modification.

Restructured loan modifications primarily included maturity date extensions and payment schedule modifications. There were no modifications to principal balances of the loans that were restructured. Accordingly, there was no impact on the Company’s allowance for loan and lease losses resulting from the modifications.

All loans with a principal balance of $0.5 million or more that have been modified in a troubled debt restructuring are considered impaired and evaluated individually for impairment. The nature and extent of impairment of restructured loans, including those that have experienced a subsequent payment default, are considered in the determination of an appropriate level of allowance for loan and lease losses. This evaluation resulted in an allowance for loan and lease losses attributable to such restructured loans of $7 thousand as of both March 31, 2022 and December 31, 2021.